Junk bond

From Traderpedia

Definition:
A junk bond (or high-yield bond) is one with a credit rating of BB or lower and that carries higher risk of interest or principal default than better rated investment grade bonds.


Junk bonds are issued in leveraged buyouts and other takeovers by companies without long track records of sales and earnings, or by those with questionable credit strength.

Also known as high-yield or non-investment grade, junk bonds are debt instruments issued by companies seen to have an increased default risk. The traditional definition is that an instruments with a Moody's rating of below Baa (BBB for S&P). Some of these bonds started off as well rated, but were downgraded. Others were issued as high-yield instruments.